BCDR International Arbitration Review
December 2016 - Volume 3 - Issue 2
Page 371

State-Owned Enterprises as Claimants in Investment Treaty Arbitration:

Is the Broches Test on the Ebb?

Reza Mohtashami & Farouk El-Hosseny


State-owned enterprises (SOEs) play an increasingly crucial role in the global economy as foreign investors. In principle, an SOE is a “juridical person” that may qualify as a “national of another Contracting State” within the meaning of Article 25 of the ICSID Convention. An SOE from an ICSID Contracting State that made an investment in another Contracting State should, a priori, be entitled to standing before the Centre. One of the lead drafters of the ICSID Convention, Aron Broches, confirmed that SOE claims against states under the Convention should be permissible provided that the SOE was not “acting as an agent for the government” or “discharging an essentially governmental function”. This statement has become known as the “Broches test”. This article examines recent decisions addressing the Broches test, and questions the extent to which the test is likely to preclude SOEs from standing before ICSID.